Natural Gas Advances Most in Three Weeks on Cold Weather View

Natural gas futures climbed in New York, capping the biggest gain in three weeks, on forecasts for below-normal temperatures that would reduce inventories of the heating and power-plant fuel.

Gas advanced 3.3 percent, the biggest gain since Oct. 30. MDA Weather Services predicted colder weather than usual in the eastern half of the U.S. through Dec. 4. A government report tomorrow may show gas stockpiles slid 38 billion cubic feet last week, the first withdrawal of the season, according to the median of 19 analyst estimates compiled by Bloomberg.

“The market is trading off the forecasts of cold weather,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “We’re probably going to see a healthy withdrawal from gas storage in this week’s report.”

Natural gas for December delivery rose 11.8 cents to $3.674 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Oct. 25. Trading volume was 14 percent above the 100-day average at 3 p.m. Gas has climbed 9.6 percent this year.

The discount of December to January futures narrowed 1 cent to 3.9 cents. March gas traded 1.6 cents above the April contract, compared with 0.9 cent yesterday.

December $3.60 puts were the most active options in electronic trading. They were 5.3 cents lower at 3.1 cents per million Btu on volume of 1,205 at 3:42 p.m. Puts accounted for 47 percent of trading volume.

New York

The low in New York on Nov. 27 may be 24 degrees Fahrenheit (minus 4 Celsius), 14 less than average, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 15 degrees, 14 lower than normal.

About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.

“Based on the current weather projections, heating-related gas demand will be above normal over the forecast period and will result in further net withdrawals from inventory,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, wrote in a note to clients today.

The U.S. may have 1.3 percent more heating-degree days, a measure of weather-driven energy demand, from November to March compared with the same period last year, Commodity Weather Group LLC in Bethesda, Maryland, said in on Oct. 15 seasonal outlook.

Gas supplies totaled 3.834 trillion cubic feet in the week ended Nov. 8, EIA data show. Inventories were 1.5 percent above the five-year average and down 2 percent from a year earlier.

The five-year average stockpile drop for the week ended Nov. 15 is 2 billion cubic feet, according to the EIA. Supplies fell 36 billion in the same period last year.

Natural gas will trade close to $4 per thousand cubic feet ($3.89 per million Btu) for the next several years, said Bob Brackett, an analyst at Sanford C. Bernstein & Co. in New York, in a note to clients today.

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